What's the likely impact of a $20 federal minimum wage?

Joe Williams

Freshman House Democrat Rep. Rashida Tlaib (D-MI) is calling for a hike in the federal minimum wage to $20 per hour, an increase that would likley boost the wages of millions of Americans and move many families out of poverty, but also result in millions of low-wage earners losing their jobs.

The minimum wage debate has long-been heated, with advocates for a higher benchmark arguing it would make a small dent in closing the gap for lower-income workers and opponents highlighting the potential economic impact, including the expected job losses.

Republicans have largely called on U.S. firms to independently raise pay instead of opting for a legislative solution. Top White House economic advisor Larry Kudlow, for example, said on Tuesday that the ongoing U.S. economic growth is benefiting all income levels. 

"We can have an unlimited minimum wage through private sector prosperity," he told Fox & Friends. "That's the best way to do it and that's where we're going."

The current $7.25 per hour federal minimum has not been changed since 2009. Several states, however, are poised to raise their minimum wage to $15 per hour in the coming years and the U.S. House of Representatives recently passed bipartisan legislation to increase the federal threshold to that amount.

The move has support from 2020 Democratic presidential candidates, including Sen. Bernie Sanders, a Vermont independent, and Sen. Kamala Harris of California. It is unlikely to get a vote in the Senate, however, amid opposition from Republicans including Senate Majority Leader Mitch McConnell of Kentucky.

Meanwhile, some companies are also acting independently to increase their own base pay. Target is aiming to reach a $15-hour minimum wage by 2020, while Walmart says the average worker makes $14.26 per hour, or $19.31 per hour with all benefits included.

Now, Rep. Rashida Tlaib is increasing the stakes. The Michigan Democrat recently called for a federal minimum wage hike to $20 per hour, highlighting the low pay that restaurant workers and others still receive despite a bustling U.S. economy.

“People cannot live on those kinds of wages, and I can't allow people to be living off tips, you know, relying on tips for wages,” she said over the weekend at an event hosted by the Restaurant Opportunities Center of Michigan and advocacy group One Fair Wage. “They say all of this is going to raise the cost, but I can tell you, milk has gone up, eggs have gone up, everything has gone up. The cost of a lot of things that we need has gone up already.”

While such a move would come with positives like lifting millions of American families out of poverty, it could also lead to a large reduction in low-wage positions.

A $15 minimum wage, for example, would increase pay for 17 million U.S. workers by 2025 and raise 1.3 million individuals above the federal poverty threshold.

It would also eliminate positions for 1.3 million largely lower-income earners, according to the Congressional Budget Office. The federal scorekeeper said the hike would raise prices, though largely on higher earners, while raising yearly income for poorer families by 5.3 percent.

“Families whose income would be below the poverty threshold under current law would receive an additional $8 billion in real family income,” CBO wrote. “All consumers would pay higher prices, but higher-income families, who spend more, would pay more of those costs.”

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Despite the potential widespread impact of a significant hike in the federal minimum wage, some U.S. businesses are already acting to meet Tlaib’s push. Bank of America, for example, recently said it would raise its base pay to $20 per hour by 2021.

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